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What is a dividend?

Dividends are the profits that shareholders receive regularly from listed companies at a certain payout ratio.

Generally speaking, after the financial year is settled, a listed company will distribute part of its profits to shareholders as dividends based on the number of shares held by shareholders.

Important Dividend Dates

Dividend payments follow a chronological order of events and the associated dates are important to determine the shareholders who qualify for receiving the dividend payment.

• Announcement Date: Dividends are announced by company management on the announcement date, and must be approved by the shareholders before they can be paid.

• Ex-Dividend Date: The date on which the dividend eligibility expires is called the ex-dividend date or simply the ex-date. For instance, if a stock has an ex-date of Monday, May 5, then shareholders who buy the stock on or after that day will NOT qualify to get the dividend as they are buying it on or after the dividend expiry date. Shareholders who own the stock one business day prior to the ex-date - that is on Friday, May 2, or earlier - will receive the dividend.

• Record Date: The record date is the cut-off date, established by the company in order to determine which shareholders are eligible to receive a dividend or distribution.

• Payment Date: The company issues the payment of the dividend on the payment date, which is when the money gets credited to investors' accounts.

Impact of dividends on share price

Since dividends are irreversible, their payments typically lead to money going out of the company's books and accounts of the business forever. Therefore, dividend payments impact share price – it may decline by a similar amount at the opening session of the ex-dividend date.

For example, a company that is trading at $60 per share declares a $2 dividend on the announcement date. On the ex-dividend date, it comes down by a similar $2 and begins trading at $58 at the start of the trading session on the ex-dividend date, because anyone buying on the ex-dividend date will not receive the dividend.

How to find dividend information on Moomoo

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